##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1937
 For
the transition period from _________ to _________
 Commission File No. 001-16101
 BANCORP RHODE ISLAND, INC.
  Rhode Island
    
    05-0509802(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 ONE TURKS HEAD PLACE, PROVIDENCE, RI 02903
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
  Common Stock  Par Value $0.01
    
    4,684,705 shares(class)
    
    (outstanding)




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##### 



BANCORP RHODE ISLAND, INC.
Quarterly Report on Form 10-Q
Table of Contents
 Description
    
    Page NumberCover Page
    
    
    1Table of Contents
    
    
    2Part I 
Financial InformationItem 1.
Financial Statements (unaudited)Consolidated Balance Sheets
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statements of Changes in Shareholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Condensed Notes to Consolidated Financial Statements
    
    
    7-29Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    30-51Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    52Item 4. Controls and Procedures
    
    
    53Part II  Other InformationItem 1. Legal Proceedings
    
    
    54Item 1A. Risk Factors
    
    
    54-55Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56Item 3. Defaults Upon Senior Securities
    
    
    56Item 5. Other Information
    
    
    56Item 6. Exhibits
    
    
    57Signature Page
    
    
    58Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  Special Note Regarding Forward Looking Statements
    2




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Balance Sheets

(unaudited)
 June 30,
    
    
    December 31,2011
    
    
    2010(In thousands)ASSETS:Cash and due from banks
    
    $
    29,444
    
    
    $
    14,384Overnight investments
    
    
    1,296
    
    
    
    395Total cash and cash equivalents
    
    
    30,740
    
    
    
    14,779Available for sale securities (amortized cost of $347,505 and
$357,402, respectively)
    
    
    352,695
    
    
    
    360,025Stock in Federal Home Loan Bank of Boston
    
    
    16,274
    
    
    
    16,274Loans and leases receivable:Commercial loans and leases
    
    
    786,704
    
    
    
    780,264Residential mortgage loans
    
    
    157,415
    
    
    
    164,877Consumer and other loans
    
    
    208,558
    
    
    
    210,348Total loans and leases receivable
    
    
    1,152,677
    
    
    
    1,155,489Allowance for loan and lease losses
    
    
    (18,083
    )
    
    
    (18,654
    )Net loans and leases receivable
    
    
    1,134,594
    
    
    
    1,136,835Premises and equipment, net
    
    
    11,514
    
    
    
    11,889Goodwill, net
    
    
    12,262
    
    
    
    12,262Accrued interest receivable
    
    
    4,380
    
    
    
    4,842Investment in bank-owned life insurance
    
    
    31,886
    
    
    
    31,277Prepaid expenses and other assets
    
    
    24,411
    
    
    
    15,576Total assets
    
    $
    1,618,756
    
    
    $
    1,603,759LIABILITIES:Deposits:Demand deposit accounts
    
    $
    282,068
    
    
    $
    264,274NOW accounts
    
    
    66,093
    
    
    
    70,327Money market accounts
    
    
    123,843
    
    
    
    96,285Savings accounts
    
    
    330,054
    
    
    
    341,667Certificate of deposit accounts
    
    
    293,787
    
    
    
    347,613Total deposits
    
    
    1,095,845
    
    
    
    1,120,166Overnight and short-term borrowings
    
    
    35,955
    
    
    
    40,997Wholesale repurchase agreements
    
    
    20,000
    
    
    
    20,000Federal Home Loan Bank of Boston borrowings
    
    
    293,277
    
    
    
    260,889Subordinated deferrable interest debentures
    
    
    13,403
    
    
    
    13,403Other liabilities
    
    
    26,745
    
    
    
    19,626Total liabilities
    
    
    1,485,225
    
    
    
    1,475,081SHAREHOLDERS EQUITY:Common stock, par value $0.01 per share, authorized 11,000,000 shares:Issued: 5,080,941 and 5,047,942 shares, respectively
    
    
    50
    
    
    
    50Additional paid-in capital
    
    
    75,556
    
    
    
    73,866Treasury stock, at cost: 396,986 and 373,850 shares, respectively
    
    
    (13,378
    )
    
    
    (12,527
    )Retained earnings
    
    
    67,929
    
    
    
    65,584Accumulated other comprehensive income, net
    
    
    3,374
    
    
    
    1,705Total shareholders equity
    
    
    133,531
    
    
    
    128,678Total liabilities and shareholders equity
    
    $
    1,618,756
    
    
    $
    1,603,759
 See accompanying notes to unaudited consolidated financial statements
  3




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Statements of Operations

(unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands, except per share data)Interest and dividend income:Overnight investments
    
    $
    1
    
    
    $
    
    
    
    $
    1
    
    
    $
    5Mortgage-backed securities
    
    
    2,606
    
    
    
    3,041
    
    
    
    5,231
    
    
    
    6,270Investment securities
    
    
    371
    
    
    
    490
    
    
    
    768
    
    
    
    1,040Federal Home Loan Bank of Boston stock dividends
    
    
    13
    
    
    
    
    
    
    
    25
    
    
    
    Loans and leases
    
    
    14,505
    
    
    
    15,105
    
    
    
    29,055
    
    
    
    29,673Total interest and dividend income
    
    
    17,496
    
    
    
    18,636
    
    
    
    35,080
    
    
    
    36,988Interest expense:Deposits
    
    
    1,248
    
    
    
    2,164
    
    
    
    2,707
    
    
    
    4,442Overnight and short-term borrowings
    
    
    9
    
    
    
    19
    
    
    
    19
    
    
    
    37Wholesale repurchase agreements
    
    
    142
    
    
    
    143
    
    
    
    281
    
    
    
    282Federal Home Loan Bank of Boston borrowings
    
    
    1,931
    
    
    
    2,518
    
    
    
    4,227
    
    
    
    5,183Subordinated deferrable interest debentures
    
    
    167
    
    
    
    166
    
    
    
    332
    
    
    
    330Total interest expense
    
    
    3,497
    
    
    
    5,010
    
    
    
    7,566
    
    
    
    10,274Net interest income
    
    
    13,999
    
    
    
    13,626
    
    
    
    27,514
    
    
    
    26,714Provision for loan and lease losses
    
    
    850
    
    
    
    1,550
    
    
    
    1,975
    
    
    
    3,150Net interest income after provision for loan and
lease losses
    
    
    13,149
    
    
    
    12,076
    
    
    
    25,539
    
    
    
    23,564Noninterest income:Total
other-than-temporary impairment losses on available for sale securities
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    49Non-credit
component of other-than-temporary losses recognized in other comprehensive income
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (664
    )Credit
component of other-than-temporary impairment losses on available for sale securities
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    (615
    )Service charges on deposit accounts
    
    
    1,215
    
    
    
    1,348
    
    
    
    2,355
    
    
    
    2,612Commissions on nondeposit investment products
    
    
    356
    
    
    
    148
    
    
    
    550
    
    
    
    385Income from bank-owned life insurance
    
    
    306
    
    
    
    318
    
    
    
    609
    
    
    
    633Loan related fees
    
    
    131
    
    
    
    133
    
    
    
    351
    
    
    
    322Net gains on
lease sales and commissions on loans originated for others
    
    
    64
    
    
    
    6
    
    
    
    60
    
    
    
    42Gain on sale of available for sale securities
    
    
    
    
    
    
    103
    
    
    
    212
    
    
    
    578Other income
    
    
    200
    
    
    
    273
    
    
    
    467
    
    
    
    643Total noninterest income
    
    
    2,272
    
    
    
    2,285
    
    
    
    4,604
    
    
    
    4,600Noninterest expense:Salaries and employee benefits
    
    
    6,655
    
    
    
    5,746
    
    
    
    12,589
    
    
    
    11,589Professional services
    
    
    2,132
    
    
    
    537
    
    
    
    2,738
    
    
    
    1,169Occupancy
    
    
    846
    
    
    
    829
    
    
    
    1,753
    
    
    
    1,690Data processing
    
    
    687
    
    
    
    654
    
    
    
    1,368
    
    
    
    1,308FDIC insurance
    
    
    442
    
    
    
    475
    
    
    
    919
    
    
    
    950Operating
    
    
    428
    
    
    
    467
    
    
    
    882
    
    
    
    929Marketing
    
    
    378
    
    
    
    383
    
    
    
    731
    
    
    
    641Equipment
    
    
    256
    
    
    
    255
    
    
    
    532
    
    
    
    510Loan workout and other real estate owned
    
    
    161
    
    
    
    337
    
    
    
    367
    
    
    
    673Loan servicing
    
    
    135
    
    
    
    171
    
    
    
    279
    
    
    
    347Other expenses
    
    
    498
    
    
    
    576
    
    
    
    1,729
    
    
    
    1,112Total noninterest expense
    
    
    12,618
    
    
    
    10,430
    
    
    
    23,887
    
    
    
    20,918Income before income taxes
    
    
    2,803
    
    
    
    3,931
    
    
    
    6,256
    
    
    
    7,246Income tax expense
    
    
    984
    
    
    
    1,250
    
    
    
    2,130
    
    
    
    2,346Net income
    
    $
    1,819
    
    
    $
    2,681
    
    
    $
    4,126
    
    
    $
    4,900Per share data:Basic earnings per common share
    
    $
    0.39
    
    
    $
    0.57
    
    
    $
    0.88
    
    
    $
    1.05Diluted earnings per common share
    
    $
    0.38
    
    
    $
    0.57
    
    
    $
    0.87
    
    
    $
    1.05Cash dividends declared per common share
    
    $
    0.19
    
    
    $
    0.17
    
    
    $
    0.38
    
    
    $
    0.34Weighted average common shares outstanding  basic
    
    
    4,689
    
    
    
    4,664
    
    
    
    4,686
    
    
    
    4,643Weighted average common shares outstanding  diluted
    
    
    4,768
    
    
    
    4,690
    
    
    
    4,734
    
    
    
    4,670
 See accompanying notes to unaudited consolidated financial statements
  4




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Statements of Changes in Shareholders Equity

(unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-in
    
    
    Treasury
    
    
    Retained
    
    
    ComprehensiveSix months ended June 30,
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Total(In thousands, expect per share data)2010Balance at December 31, 2009
    
    $
    50
    
    
    $
    72,783
    
    
    $
    (12,309
    )
    
    $
    59,012
    
    
    $
    1,125
    
    
    $
    120,661Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,900
    
    
    
    
    
    
    
    4,900Other comprehensive income:Unrealized
holding gains on securities available for sale,
net of taxes of ($2,465)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,578
    
    
    
    4,578Reclassification adjustment for
net gains included in net
income, net of taxes of $202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (376
    )
    
    
       (376
    )Non-credit portion OTTI, net of
taxes of ($233)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    431
    
    
    
    431Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,533Exercise of stock options
    
    
    
    
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    297Macrolease acquisition
    
    
    
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211Share repurchases
    
    
    
    
    
    
    
    
    
    
    (218
    )
    
    
    
    
    
    
    
    
    
    
    (218
    )Share-based compensation
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228Tax benefit from exercise of stock
options
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Dividends on common stock ( $0.34
per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,580
    )
    
    
    
    
    
    
    (1,580
    )Balance at June 30, 2010
    
    $
    50
    
    
    $
    73,514
    
    
    $
    (12,527
    )
    
    $
    62,332
    
    
    $
    5,758
    
    
    $
    129,1272011Balance at December 31, 2010
    
    $
    50
    
    
    $
    73,866
    
    
    $
    (12,527
    )
    
    $
    65,584
    
    
    $
    1,705
    
    
    $
    128,678Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,126
    
    
    
    
    
    
    
    4,126Other comprehensive income:Unrealized holding gains on
securities available for
sale, net of taxes of $(972)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,807
    
    
    
    1,807Reclassification adjustment for
net gains included in net
income, net of taxes of $74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (138
    )
    
    
    (138
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,795Exercise of stock options
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Share repurchases
    
    
    
    
    
    
    
    
    
    
    (851
    )
    
    
    
    
    
    
    
    
    
    
    (851
    )Share-based compensation
    
    
    
    
    
    
    924
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    924Tax benefit from exercise of stock
options
    
    
    
    
    
    
    346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    346Dividends on common stock ($0.38
per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,781
    )
    
    
    
    
    
    
    (1,781
    )Balance at June 30, 2011
    
    $
    50
    
    
    $
    75,556
    
    
    $
    (13,378
    )
    
    $
    67,929
    
    
    $
    3,374
    
    
    $
    133,531
 See accompanying notes to unaudited consolidated financial statements
  5




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Statements of Cash Flows

(unaudited)
 Six Months EndedJune 30,2011
    
    
    2010(In thousands)Cash flows from operating activities:Net income
    
    $
    4,126
    
    
    $
    4,900Adjustments to reconcile net income to net cash (used in) provided by
operating activities:Depreciation, amortization and accretion, net
    
    
    (561
    )
    
    
    (2,778
    )Provision for loan and lease losses
    
    
    1,975
    
    
    
    3,150Income from bank-owned life insurance
    
    
    (609
    )
    
    
    (633
    )Share-based compensation expense
    
    
    924
    
    
    
    228Net loss (gain) on lease sales
    
    
    3
    
    
    
    (19
    )Gain on sale of available for sale securities
    
    
    (212
    )
    
    
    (578
    )Credit component of other-than-temporary impairment
losses on available for sale securities
    
    
    
    
    
    
    615Gain on sale of other real estate owned
    
    
    (23
    )
    
    
    (34
    )Proceeds from sales of leases
    
    
    208
    
    
    
    909Leases originated for sale
    
    
    (211
    )
    
    
    (890
    )Decrease in accrued interest receivable
    
    
    462
    
    
    
    260Increase in prepaid expenses and other assets
    
    
    (10,113
    )
    
    
    (326
    )Decrease in other liabilities
    
    
    (3,732
    )
    
    
    (3,820
    )Net cash (used in) provided by operating activities
    
    
    (7,763
    )
    
    
    984Cash flows from investing activities:Available for sale securities:Purchases
    
    
    (60,102
    )
    
    
    (71,495
    )Maturities and principal repayments
    
    
    75,780
    
    
    
    101,702Proceeds from sales
    
    
    4,176
    
    
    
    8,628Net increase (decrease) in loans and leases
    
    
    1,202
    
    
    
    (24,469
    )Capital expenditures for premises and equipment
    
    
    (315
    )
    
    
    (464
    )Proceeds from sale of other real estate owned
    
    
    973
    
    
    
    755Net cash provided by investing activities
    
    
    21,714
    
    
    
    14,657Cash flows from financing activities:Net (decrease) increase in deposits
    
    
    (24,321
    )
    
    
    75,736Net decrease in overnight and short-term borrowings
    
    
    (5,042
    )
    
    
    (2,833
    )Proceeds from long-term borrowings
    
    
    188,800
    
    
    
    33,700Repayment of long-term borrowings
    
    
    (156,412
    )
    
    
    (87,487
    )Exercise of stock options
    
    
    420
    
    
    
    79Tax benefit (expense) from exercise of stock options
    
    
    346
    
    
    
    (5
    )Dividends on common stock
    
    
    (1,781
    )
    
    
    (1,580
    )Net cash provided by financing activities
    
    
    2,010
    
    
    
    17,610Net increase in cash and cash equivalents
    
    
    15,961
    
    
    
    33,251Cash and cash equivalents at beginning of period
    
    
    14,779
    
    
    
    20,830Cash and cash equivalents at end of period
    
    $
    30,740
    
    
    $
    54,081Supplementary Disclosures:Cash paid for interest
    
    $
    8,080
    
    
    $
    10,845Cash paid for income taxes
    
    
    2,769
    
    
    
    1,955Non-cash investing and financing transactions:Change in accumulated other comprehensive income, net of taxes
    
    
    1,669
    
    
    
    4,202Goodwill increase related to Macrolease acquisition
    
    
    
    
    
    
    23Treasury stock acquisitions from shares tendered in share-based
payment transactions
    
    
    851
    
    
    
    218Transfer of loans to other real estate owned
    
    
    570
    
    
    
    1,109Non-credit component of other-than-temporary impairment, net of taxes
    
    
    
    
    
    
    431(Purchase) sale of available for sale securities not yet settled
    
    
    (10,000
    )
    
    
    4,414
 See accompanying notes to unaudited consolidated financial statements
  6




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Notes to Consolidated Financial Statements (unaudited)
 (1) Basis of Presentation
       (2) Earnings per Share
   7




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##### Table of Contents



Three Months EndedJune 30,
    
    
    June 30,2011
    
    
    2010(In thousands, except per share data)Basic EPS Computation:Numerator:Net income
    
    $
    1,819
    
    
    $
    2,681Denominator:Weighted average shares outstanding
    
    
    4,689
    
    
    
    4,664Basic EPS
    
    $
    0.39
    
    
    $
    0.57Diluted EPS Computation:Numerator:Net income
    
    $
    1,819
    
    
    $
    2,681Denominator:Weighted average shares outstanding
    
    
    4,689
    
    
    
    4,664Dilutive effect of stock options
    
    
    77
    
    
    
    25Dilutive effect of contingent shares
    
    
    2
    
    
    
    1Diluted weighted average shares outstanding
    
    
    4,768
    
    
    
    4,690Diluted EPS
    
    $
    0.38
    
    
    $
    0.57
  (3) Recently Adopted Accounting Pronouncements
 Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Instruments
 Receivables (Topic 310): Disclosures
About the Credit Quality of Financing Receivables and the Allowance for Credit Losses Receivables, Note 6 Credit Quality of Loans and Leases and Allowance
for Loan and Lease Losses.
  8




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##### Table of Contents



(4) Recently Issued Accounting Pronouncements
 Receivables (Topic 310): Deferral of the
Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. Receivables (Topic 310): A Creditors Determination of Whether a Restructuring is a
Troubled Debt Restructuring
 Receivables (Topic 310): A Creditors
Determination of Whether a Restructuring is a Troubled Debt Restructuring.
 Fair Value Measurement (Topic 820).
 Comprehensive Income (Topic 220).
  9




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##### Table of Contents



(5) Available for Sale Securities
   Amortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)At June 30, 2011:GSE obligations
    
    $
    80,979
    
    
    $
    272
    
    
    $
    (158
    )
    
    $
    81,093Trust preferred CDOs (1)
    
    
    1,518
    
    
    
    
    
    
    
    (786
    )
    
    
    732Collateralized mortgage obligations
    
    
    21,351
    
    
    
    347
    
    
    
    (400
    )
    
    
    21,298GSE mortgage-backed securities
    
    
    243,657
    
    
    
    6,981
    
    
    
    (1,066
    )
    
    
    249,572Total
    
    $
    347,505
    
    
    $
    7,600
    
    
    $
    (2,410
    )
    
    $
    352,695At December 31, 2010:GSE obligations
    
    $
    80,992
    
    
    $
    436
    
    
    $
    (394
    )
    
    $
    81,034Trust preferred CDOs (1)
    
    
    1,518
    
    
    
    
    
    
    
    (956
    )
    
    
    562Collateralized mortgage obligations
    
    
    28,885
    
    
    
    517
    
    
    
    (1,234
    )
    
    
    28,168GSE mortgage-backed securities
    
    
    246,007
    
    
    
    6,076
    
    
    
    (1,822
    )
    
    
    250,261Total
    
    $
    357,402
    
    
    $
    7,029
    
    
    $
    (4,406
    )
    
    $
    360,025
 (1)
    
    Amortized cost is net of write-downs as a result of other-than-temporary
impairment.
   Number
    
    
    Less than One Year
    
    
    One Year or Longer
    
    
    Totalof
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedHoldings
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(Dollars in thousands)At June 30, 2011:GSE obligations
    
    
    6
    
    
    $
    29,835
    
    
    $
    (158
    )
    
    $
    
    
    
    $
    
    
    
    $
    29,835
    
    
    $
    (158
    )Trust preferred CDOs
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    732
    
    
    
    (786
    )
    
    
    732
    
    
    
    (786
    )Collateralized mortgage obligations
    
    
    3
    
    
    
    1,233
    
    
    
    (12)
    
    
    
    5,469
    
    
    
    (388
    )
    
    
    6,702
    
    
    
    (400
    )GSE mortgage-backed securities
    
    
    16
    
    
    
    53,890
    
    
    
    (1,066
    )
    
    
    
    
    
    
    
    
    
    
    53,890
    
    
    
    (1,066
    )Total
    
    
    27
    
    
    $
    84,958
    
    
    $
    (1,236
    )
    
    $
    6,201
    
    
    $
    (1,174
    )
    
    $
    91,159
    
    
    $
    (2,410
    )At December 31, 2010:GSE obligations
    
    
    7
    
    
    $
    39,599
    
    
    $
    (394
    )
    
    $
    
    
    
    $
    
    
    
    $
    39,599
    
    
    $
    (394
    )Trust preferred CDOs
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    (956
    )
    
    
    562
    
    
    
    (956
    )Collateralized mortgage obligations
    
    
    3
    
    
    
    1,912
    
    
    
    (12
    )
    
    
    7,896
    
    
    
    (1,222
    )
    
    
    9,808
    
    
    
    (1,234
    )GSE mortgage-backed securities
    
    
    15
    
    
    
    60,592
    
    
    
    (1,822
    )
    
    
    
    
    
    
    
    
    
    
    60,592
    
    
    
    (1,822
    )Total
    
    
    27
    
    
    $
    102,103
    
    
    $
    (2,228
    )
    
    $
    8,458
    
    
    $
    (2,178
    )
    
    $
    110,561
    
    
    $
    (4,406
    )
  10




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##### Table of Contents



After One, But
    
    
    After Five, ButWithin One Year
    
    
    Within Five Years
    
    
    Within Ten Years
    
    
    After Ten YearsAmortized
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    Amortized
    
    
    Fair
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Fair Value(In thousands)At June 30, 2011:GSE obligations
    
    $
    16,000
    
    
    $
    16,162
    
    
    $
    64,979
    
    
    $
    64,931
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Trust preferred CDOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,518
    
    
    
    732Collateralized mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,873
    
    
    
    12,163
    
    
    
    9,478
    
    
    
    9,135GSE mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    1,759
    
    
    
    1,836
    
    
    
    13,800
    
    
    
    14,546
    
    
    
    228,098
    
    
    
    233,190Total
    
    $
    16,000
    
    
    $
    16,162
    
    
    $
    66,738
    
    
    $
    66,767
    
    
    $
    25,673
    
    
    $
    26,709
    
    
    $
    239,094
    
    
    $
    243,057At December 31, 2010:GSE obligations
    
    $
    
    
    
    $
    
    
    
    $
    70,997
    
    
    $
    71,076
    
    
    $
    9,995
    
    
    $
    9,957
    
    
    $
    
    
    
    $
    Trust preferred CDOs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,518
    
    
    
    562Collateralized mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,059
    
    
    
    15,426
    
    
    
    13,827
    
    
    
    12,743GSE mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    2,220
    
    
    
    2,315
    
    
    
    10,396
    
    
    
    11,055
    
    
    
    233,390
    
    
    
    236,891Total
    
    $
    
    
    
    $
    
    
    
    $
    73,217
    
    
    $
    73,391
    
    
    $
    35,450
    
    
    $
    36,438
    
    
    $
    248,735
    
    
    $
    250,196
      11




---



##### Table of Contents



Credit Component of Other-Than-Temporary Impairment Losses For Whicha Portion Was Recognized in OtherComprehensive Income2011
    
    
    2010(In thousands)Balance, January 1
    
    $
    (1,416
    )
    
    $
    (384
    )Credit losses for which an
other-than-temporary
impairment was previously
recognized
    
    
    
    
    
    
    (615
    )Balance, June 30
    
    $
    (1,416
    )
    
    $
    (999
    )
  (6) Credit Quality of Loans and Leases and Allowance for Loan and Lease Losses
   12




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June 30, 2011
    
    
    December 31, 201090+
    
    
    
    
    
    
    
    
    
    
    90+Days,
    
    
    
    
    
    
    
    
    
    
    Days,Still
    
    
    
    
    
    
    
    
    
    
    StillNonaccrual
    
    
    Accruing
    
    
    Total
    
    
    Nonaccrual
    
    
    Accruing
    
    
    Total(In thousands)Commercial loans and
leases:Commercial real estate
nonowner occupied
    
    $
    248
    
    
    $
    
    
    
    $
    248
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial real estate
 owner occupied
    
    
    5,185
    
    
    
    
    
    
    
    5,185
    
    
    
    5,272
    
    
    
    
    
    
    
    5,272Commercial
and industrial
    
    
    2,362
    
    
    
    
    
    
    
    2,362
    
    
    
    2,462
    
    
    
    
    
    
    
    2,462Multifamily
    
    
    1,568
    
    
    
    
    
    
    
    1,568
    
    
    
    717
    
    
    
    
    
    
    
    717Small business
    
    
    817
    
    
    
    
    
    
    
    817
    
    
    
    1,090
    
    
    
    
    
    
    
    1,090Construction
    
    
    45
    
    
    
    
    
    
    
    45
    
    
    
    470
    
    
    
    
    
    
    
    470Leases and other
    
    
    1,633
    
    
    
    80
    
    
    
    1,713
    
    
    
    581
    
    
    
    
    
    
    
    581Total commercial loans and
leases
    
    
    11,858
    
    
    
    80
    
    
    
    11,938
    
    
    
    10,592
    
    
    
    
    
    
    
    10,592Residential mortgage loans:One- to four-family
adjustable rate
    
    
    5,134
    
    
    
    
    
    
    
    5,134
    
    
    
    4,089
    
    
    
    
    
    
    
    4,089One- to four-family
fixed rate
    
    
    588
    
    
    
    
    
    
    
    588
    
    
    
    956
    
    
    
    
    
    
    
    956Total residential mortgage
loans
    
    
    5,722
    
    
    
    
    
    
    
    5,722
    
    
    
    5,045
    
    
    
    
    
    
    
    5,045Consumer and other loans:Home equity
 term loans
    
    
    878
    
    
    
    
    
    
    
    878
    
    
    
    826
    
    
    
    
    
    
    
    826Home equity  lines of
credit
    
    
    160
    
    
    
    
    
    
    
    160
    
    
    
    50
    
    
    
    
    
    
    
    50Total consumer and other
loans
    
    
    1,038
    
    
    
    
    
    
    
    1,038
    
    
    
    876
    
    
    
    
    
    
    
    876Total nonperforming loans
and leases
    
    $
    18,617
    
    
    $
    80
    
    
    $
    18,697
    
    
    $
    16,513
    
    
    $
    
    
    
    $
    16,513
  13




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##### Table of Contents



June 30, 201130-59
    
    
    60-89
    
    
    90+Days
    
    
    Days
    
    
    DaysPast
    
    
    Past
    
    
    PastDue
    
    
    Due
    
    
    Due (1)
    
    
    Total(In thousands)Commercial loans and leases:Commercial
real estate  nonowner occupied
    
    $
    385
    
    
    $
    378
    
    
    $
    
    
    
    $
    763Commercial real estate  owner occupied
    
    
    454
    
    
    
    39
    
    
    
    
    
    
    
    493Commercial and industrial
    
    
    1,030
    
    
    
    500
    
    
    
    
    
    
    
    1,530Multifamily
    
    
    975
    
    
    
    299
    
    
    
    
    
    
    
    1,274Small business
    
    
    450
    
    
    
    333
    
    
    
    
    
    
    
    783Leases and other
    
    
    288
    
    
    
    20
    
    
    
    80
    
    
    
    388Total past due commercial loans and leases
    
    
    3,582
    
    
    
    1,569
    
    
    
    80
    
    
    
    5,231Residential mortgage loans:One- to four-family adjustable
    
    
    62
    
    
    
    224
    
    
    
    
    
    
    
    286One- to four family fixed rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total past due residential mortgage loans
    
    
    62
    
    
    
    224
    
    
    
    
    
    
    
    286Consumer and other loans:Home equity  term loans
    
    
    346
    
    
    
    54
    
    
    
    
    
    
    
    400Home equity  lines of credit
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    275Unsecured and other
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Total past due consumer and other loans
    
    
    637
    
    
    
    54
    
    
    
    
    
    
    
    691Total past due loans and leases
    
    $
    4,281
    
    
    $
    1,847
    
    
    $
    80
    
    
    $
    6,208
 December 31, 201030-59
    
    
    60-89
    
    
    90+Days
    
    
    Days
    
    
    DaysPast
    
    
    Past
    
    
    PastDue
    
    
    Due
    
    

Due (1)
    
    
    Total(In thousands)Commercial loans and leases:Commercial real estate  nonowner occupied
    
    $
    282
    
    
    $
    143
    
    
    $
    
    
    
    $
    425Commercial real estate  owner occupied
    
    
    832
    
    
    
    
    
    
    
    
    
    
    
    832Commercial and industrial
    
    
    346
    
    
    
    204
    
    
    
    
    
    
    
    550Multifamily
    
    
    299
    
    
    
    661
    
    
    
    
    
    
    
    960Small business
    
    
    812
    
    
    
    180
    
    
    
    
    
    
    
    992Leases and other
    
    
    1,053
    
    
    
    711
    
    
    
    
    
    
    
    1,764Total past due commercial loans and leases
    
    
    3,624
    
    
    
    1,899
    
    
    
    
    
    
    
    5,523Residential mortgage loans:One- to four-family adjustable
    
    
    2,005
    
    
    
    415
    
    
    
    
    
    
    
    2,420One- to four family fixed rate
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    142Total past due residential mortgage loans
    
    
    2,147
    
    
    
    415
    
    
    
    
    
    
    
    2,562Consumer and other loans:Home equity  term loans
    
    
    398
    
    
    
    115
    
    
    
    
    
    
    
    513Home equity  lines of credit
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    299Unsecured and other
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Total past due consumer and other loans
    
    
    704
    
    
    
    115
    
    
    
    
    
    
    
    819Total past due loans and leases
    
    $
    6,475
    
    
    $
    2,429
    
    
    $
    
    
    
    $
    8,904
 (1)
    
    90+ Days Past Due includes only those loans and leases that are still
accruing. All other loans and leases 90 days or more are included as a component of
nonaccrual loans and leases.
  14




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15




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Balance at beginning of period
    
    $
    18,222
    
    
    $
    16,625
    
    
    $
    18,654
    
    
    $
    16,536Loans and leases charged-off:Commercial loans and leases
    
    
    (564
    )
    
    
    (405
    )
    
    
    (1,851
    )
    
    
    (1,568
    )Residential mortgage loans
    
    
    (515
    )
    
    
    (490
    )
    
    
    (894
    )
    
    
    (837
    )Consumer and other loans
    
    
    (58
    )
    
    
    (14
    )
    
    
    (77
    )
    
    
    (116
    )Total loans and leases charged-off
    
    
    (1,137
    )
    
    
    (909
    )
    
    
    (2,822
    )
    
    
    (2,521
    )Recoveries of loans and leases previously charged-off:Commercial loans and leases
    
    
    122
    
    
    
    122
    
    
    
    243
    
    
    
    219Consumer and other loans
    
    
    26
    
    
    
    8
    
    
    
    33
    
    
    
    12Total recoveries of loans and leases previously
charged-off
    
    
    148
    
    
    
    130
    
    
    
    276
    
    
    
    231Net charge-offs
    
    
    (989
    )
    
    
    (779
    )
    
    
    (2,546
    )
    
    
    (2,290
    )Provision for loan and lease losses charged against
income:Commercial loans and leases
    
    
    342
    
    
    
    968
    
    
    
    1,265
    
    
    
    1,825Residential mortgage loans
    
    
    851
    
    
    
    974
    
    
    
    777
    
    
    
    1,052Consumer and other loans
    
    
    (343
    )
    
    
    (392
    )
    
    
    (67
    )
    
    
    273Total provision for loan and lease losses
charged against income
    
    
    850
    
    
    
    1,550
    
    
    
    1,975
    
    
    
    3,150Balance at end of period
    
    $
    18,083
    
    
    $
    17,396
    
    
    $
    18,083
    
    
    $
    17,396
   16




---



##### Table of Contents



Individually Evaluated for
    
    
    Collectively Evaluated forImpairment
    
    
    ImpairmentAllowance
    
    
    
    
    
    
    Allowancefor Loan
    
    
    
    
    
    
    for LoanRecorded
    
    
    and Lease
    
    
    Recorded
    
    
    and LeaseInvestment
    
    
    Losses
    
    
    Investment
    
    
    Losses(In thousands)At June 30, 2011:Commercial loans and leases:Commercial real estate  nonowner
occupied
    
    $
    248
    
    
    $
    
    
    
    $
    210,640
    
    
    $
    2,823Commercial real estate  owner occupied
    
    
    6,710
    
    
    
    371
    
    
    
    169,349
    
    
    
    2,956Commercial and industrial
    
    
    2,340
    
    
    
    352
    
    
    
    157,172
    
    
    
    2,284Multifamily
    
    
    1,568
    
    
    
    142
    
    
    
    84,819
    
    
    
    1,286Small business
    
    
    111
    
    
    
    
    
    
    
    60,030
    
    
    
    1,201Construction
    
    
    
    
    
    
    
    
    
    
    27,071
    
    
    
    413Leases and other
    
    
    1,274
    
    
    
    657
    
    
    
    63,675
    
    
    
    453Total commercial loans and leases
    
    
    12,251
    
    
    
    1,522
    
    
    
    772,756
    
    
    
    11,416Residential mortgage loans:One- to four-family adjustable rate
    
    
    542
    
    
    
    7
    
    
    
    98,080
    
    
    
    1,389One- to four-family fixed rate
    
    
    
    
    
    
    
    
    
    
    58,268
    
    
    
    256Total residential mortgage loans
    
    
    542
    
    
    
    7
    
    
    
    156,348
    
    
    
    1,645Consumer and other loans:Home equity  term loans
    
    
    899
    
    
    
    7
    
    
    
    122,063
    
    
    
    686Home equity  lines of credit
    
    
    
    
    
    
    
    
    
    
    83,449
    
    
    
    750Unsecured and other
    
    
    
    
    
    
    
    
    
    
    1,231
    
    
    
    116Total consumer and other loans
    
    
    899
    
    
    
    7
    
    
    
    206,743
    
    
    
    1,552Premium on loans acquired
    
    
    
    
    
    
    
    
    
    
    547
    
    
    
    Net deferred loan origination costs
    
    
    
    
    
    
    
    
    
    
    2,591
    
    
    
    Total loans and leases
    
    $
    13,692
    
    
    $
    1,536
    
    
    $
    1,138,985
    
    
    $
    14,613At December 31, 2010:Commercial loans and leases:Commercial
real estate  nonowner occupied
    
    $
    
    
    
    $
    
    
    
    $
    200,809
    
    
    $
    2,700Commercial real estate  owner occupied
    
    
    5,272
    
    
    
    392
    
    
    
    174,494
    
    
    
    3,462Commercial and industrial
    
    
    2,288
    
    
    
    287
    
    
    
    155,591
    
    
    
    2,323Multifamily
    
    
    717
    
    
    
    108
    
    
    
    79,217
    
    
    
    1,387Small business
    
    
    462
    
    
    
    141
    
    
    
    62,379
    
    
    
    1,318Construction
    
    
    470
    
    
    
    220
    
    
    
    29,879
    
    
    
    452Leases and other
    
    
    125
    
    
    
    108
    
    
    
    66,770
    
    
    
    472Total commercial loans and leases
    
    
    9,334
    
    
    
    1,256
    
    
    
    769,139
    
    
    
    12,114Residential mortgage loans:One- to four-family adjustable rate
    
    
    549
    
    
    
    7
    
    
    
    105,792
    
    
    
    1,313One- to four-family fixed rate
    
    
    
    
    
    
    
    
    
    
    57,948
    
    
    
    460Total residential mortgage loans
    
    
    549
    
    
    
    7
    
    
    
    163,740
    
    
    
    1,773Consumer and other loans:Home equity  term loans
    
    
    906
    
    
    
    101
    
    
    
    124,208
    
    
    
    721Home equity  lines of credit
    
    
    
    
    
    
    
    
    
    
    82,778
    
    
    
    745Unsecured and other
    
    
    
    
    
    
    
    
    
    
    1,511
    
    
    
    114Total consumer and other loans
    
    
    906
    
    
    
    101
    
    
    
    208,497
    
    
    
    1,580Premium on loans acquired
    
    
    
    
    
    
    
    
    
    
    598
    
    
    
    Net deferred loan origination costs
    
    
    
    
    
    
    
    
    
    
    2,726
    
    
    
    Total loans and leases
    
    $
    10,789
    
    
    $
    1,364
    
    
    $
    1,144,700
    
    
    $
    15,467
  17




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##### Table of Contents



June 30, 2011Not
    
    
    TotalRequiring a
    
    
    Requiring a
    
    
    ImpairedSpecific
    
    
    Specific
    
    
    Loans and
    
    
    UnpaidReserve
    
    
    Reserve
    
    
    Leases
    
    
    Principal(In thousands)Commercial loans and leases:Commercial real estate  nonowner occupied
    
    $
    
    
    
    $
    248
    
    
    $
    248
    
    
    $
    565Commercial real estate  owner occupied
    
    
    4,921
    
    
    
    1,789
    
    
    
    6,710
    
    
    
    7,436Commercial and industrial
    
    
    2,080
    
    
    
    260
    
    
    
    2,340
    
    
    
    2,340Multifamily
    
    
    1,281
    
    
    
    287
    
    
    
    1,568
    
    
    
    1,568Small business
    
    
    
    
    
    
    111
    
    
    
    111
    
    
    
    111Leases and other
    
    
    997
    
    
    
    277
    
    
    
    1,274
    
    
    
    1,274Total impaired commercial loans and leases
    
    
    9,279
    
    
    
    2,972
    
    
    
    12,251
    
    
    
    13,294Residential mortgage loans:One- to four-family adjustable rate
    
    
    257
    
    
    
    285
    
    
    
    542
    
    
    
    723Total impaired residential mortgage loans
    
    
    257
    
    
    
    285
    
    
    
    542
    
    
    
    723Consumer and other loans:Home equity  term loans
    
    
    173
    
    
    
    726
    
    
    
    899
    
    
    
    899Total impaired consumer and other loans
    
    
    173
    
    
    
    726
    
    
    
    899
    
    
    
    899Total impaired loans and leases
    
    $
    9,709
    
    
    $
    3,983
    
    
    $
    13,692
    
    
    $
    14,916
 December 31, 2010Not
    
    
    TotalRequiring
    
    
    Requiring a
    
    
    Impaireda Specific
    
    
    Specific
    
    
    Loans and
    
    
    UnpaidReserve
    
    
    Reserve
    
    
    Leases
    
    
    Principal(In thousands)Commercial loans and leases:Commercial real estate  owner occupied
    
    $
    3,483
    
    
    $
    1,789
    
    
    $
    5,272
    
    
    $
    5,998Commercial and industrial
    
    
    2,008
    
    
    
    280
    
    
    
    2,288
    
    
    
    3,743Multifamily
    
    
    717
    
    
    
    
    
    
    
    717
    
    
    
    717Small business
    
    
    312
    
    
    
    150
    
    
    
    462
    
    
    
    538Construction
    
    
    470
    
    
    
    
    
    
    
    470
    
    
    
    470Leases and other
    
    
    125
    
    
    
    
    
    
    
    125
    
    
    
    125Total impaired commercial loans and leases
    
    
    7,115
    
    
    
    2,219
    
    
    
    9,334
    
    
    
    11,591Residential mortgage loans:One- to four-family adjustable rate
    
    
    259
    
    
    
    290
    
    
    
    549
    
    
    
    731Total impaired residential mortgage loans
    
    
    259
    
    
    
    290
    
    
    
    549
    
    
    
    731Consumer and other loans:Home equity  term loans
    
    
    745
    
    
    
    161
    
    
    
    906
    
    
    
    906Total impaired consumer and other loans
    
    
    745
    
    
    
    161
    
    
    
    906
    
    
    
    906Total impaired loans and leases
    
    $
    8,119
    
    
    $
    2,670
    
    
    $
    10,789
    
    
    $
    13,228
  18




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##### Table of Contents



Three Months EndedJune 30, 2011
    
    
    June 30, 2010TotalAverage
    
    
    Interest
    
    
    Average
    
    
    InterestRecorded
    
    
    Income
    
    
    Recorded
    
    
    IncomeInvestment
    
    
    Recognized
    
    
    Investment
    
    
    Recognized(In thousands)Commercial loans and leases:Commercial real estate  nonowner occupied
    
    $
    124
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial real estate  owner occupied
    
    
    5,122
    
    
    
    4
    
    
    
    4,787
    
    
    
    Commercial and industrial
    
    
    2,261
    
    
    
    
    
    
    
    908
    
    
    
    Multifamily
    
    
    878
    
    
    
    32
    
    
    
    
    
    
    
    Small business
    
    
    261
    
    
    
    7
    
    
    
    413
    
    
    
    Construction
    
    
    174
    
    
    
    
    
    
    
    529
    
    
    
    Leases and other
    
    
    711
    
    
    
    4
    
    
    
    664
    
    
    
    14Total impaired commercial loans and leases
    
    
    9,531
    
    
    
    47
    
    
    
    7,301
    
    
    
    14Residential mortgage loans:One- to four-family adjustable rate
    
    
    543
    
    
    
    24
    
    
    
    266
    
    
    
    Total impaired residential mortgage loans
    
    
    543
    
    
    
    24
    
    
    
    266
    
    
    
    Consumer and other loans:Home equity  term loans
    
    
    894
    
    
    
    4
    
    
    
    623
    
    
    
    6Home equity  lines of credit
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    1Total impaired consumer and other loans
    
    
    894
    
    
    
    4
    
    
    
    671
    
    
    
    7Total impaired loans and leases
    
    $
    10,968
    
    
    $
    75
    
    
    $
    8,238
    
    
    $
    21
 Six Months EndedJune 30, 2011
    
    
    June 30, 2010TotalAverage
    
    
    Interest
    
    
    Average
    
    
    InterestRecorded
    
    
    Income
    
    
    Recorded
    
    
    IncomeInvestment
    
    
    Recognized
    
    
    Investment
    
    
    Recognized(In thousands)Commercial loans and leases:Commercial real estate  nonowner occupied
    
    $
    62
    
    
    $
    
    
    
    $
    533
    
    
    $
    Commercial real estate  owner occupied
    
    
    4,947
    
    
    
    95
    
    
    
    4,765
    
    
    
    17Commercial and industrial
    
    
    2,263
    
    
    
    25
    
    
    
    1,358
    
    
    
    33Multifamily
    
    
    968
    
    
    
    32
    
    
    
    77
    
    
    
    Small business
    
    
    341
    
    
    
    8
    
    
    
    587
    
    
    
    1Construction
    
    
    263
    
    
    
    
    
    
    
    529
    
    
    
    Leases and other
    
    
    418
    
    
    
    6
    
    
    
    776
    
    
    
    16Total impaired commercial loans and leases
    
    
    9,262
    
    
    
    166
    
    
    
    8,625
    
    
    
    67Residential mortgage loans:One- to four-family adjustable rate
    
    
    545
    
    
    
    24
    
    
    
    266
    
    
    
    Total impaired residential mortgage loans
    
    
    545
    
    
    
    24
    
    
    
    266
    
    
    
    Consumer and other loans:Home equity  term loans
    
    
    897
    
    
    
    6
    
    
    
    400
    
    
    
    11Home equity  lines of credit
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    1Total impaired consumer and other loans
    
    
    897
    
    
    
    6
    
    
    
    449
    
    
    
    12Total impaired loans and leases
    
    $
    10,704
    
    
    $
    196
    
    
    $
    9,340
    
    
    $
    79
  19




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June 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Commercial loans and leases (risk rating):Pass-rated
    
    $
    747,446
    
    
    $
    735,869Special mention
    
    
    17,173
    
    
    
    19,825Substandard
    
    
    20,388
    
    
    
    22,779Total commercial loans and leases
    
    
    785,007
    
    
    
    778,473Residential mortgage loans (credit score):Greater than 750
    
    
    84,962
    
    
    
    84,695725  750
    
    
    13,635
    
    
    
    18,930680  724
    
    
    18,492
    
    
    
    19,310650  679
    
    
    5,292
    
    
    
    6,558620  649
    
    
    7,429
    
    
    
    6,278Less than 620
    
    
    18,063
    
    
    
    19,883Data not available
    
    
    9,017
    
    
    
    8,635Total residential mortgage loans
    
    
    156,890
    
    
    
    164,289Consumer and other loans (credit score):Greater than 750
    
    
    152,080
    
    
    
    151,710725  750
    
    
    22,171
    
    
    
    21,984680  724
    
    
    19,290
    
    
    
    20,252650  679
    
    
    4,518
    
    
    
    5,605620  649
    
    
    2,342
    
    
    
    2,756Less than 620
    
    
    6,330
    
    
    
    6,006Data not available
    
    
    911
    
    
    
    1,090Total consumer and other loans
    
    
    207,642
    
    
    
    209,403Premium on loans acquired
    
    
    547
    
    
    
    598Net deferred loan origination costs
    
    
    2,591
    
    
    
    2,726Total loans and leases
    
    $
    1,152,677
    
    
    $
    1,155,489
 (7) Derivatives
   20




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##### Table of Contents



Asset DerivativesJune 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Other AssetsDerivatives notdesignated as hedging instrumentsInterest rate products
    
    $
    864
    
    
    $
    790Total derivatives notdesignated as hedging instruments
    
    $
    864
    
    
    $
    790
 Liability DerivativesJune 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Other LiabilitiesDerivatives notdesignated as hedging instrumentsInterest rate products
    
    $
    925
    
    
    $
    832Total derivatives notdesignated as hedging instruments
    
    $
    925
    
    
    $
    832
  Derivatives Not Designated as Hedging
    
    
    Location of GainRecognized in Income on
    
    Amount of Gain Recognized inInstruments
    
    
    Derivative
    

Income on Derivative (1)Three Months Ended June 30,2011
    
    
    2010(In thousands)Interest Rate Products
    
    Loan related fees
    
    $
    (27
    )
    
    $
    (55
    )Total
    
    
    
    $
    (27
    )
    
    $
    (55
    )
  21




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##### Table of Contents



Derivatives Not Designated as
    
    
    Location of Gain or  (Loss)Recognized in Income on
    
    Amount of Gain or (Loss) Recognized inHedging Instruments
    
    
    Derivative
    

Income on Derivative (1)Six Months Ended June 30,2011
    
    
    2010(In thousands)Interest Rate Products
    
    Loan related fees
    
    $
    (19
    )
    
    $
    (23
    )Total
    
    
    
    $
    (19
    )
    
    $
    (23
    )
 (1)
    
    The amount of gain recognized in income represents net fee income and changes
related to the fair value of the interest rate products.
    (8) Fair Value of Financial Instruments
 Fair Value Measurements and Disclosures
  22




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23




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##### Table of Contents



Fair Value Measurements at June 30, 2011 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)GSE obligations
    
    $
    81,093
    
    
    $
    
    
    
    $
    81,093
    
    
    $
    Trust preferred CDOs
    
    
    732
    
    
    
    
    
    
    
    732
    
    
    
    Collateralized mortgage obligations
    
    
    21,298
    
    
    
    
    
    
    
    21,298
    
    
    
    GSE mortgage-backed securities
    
    
    249,572
    
    
    
    
    
    
    
    249,572
    
    
    
    Total available for sale securities
    
    
    352,695
    
    
    
    
    
    
    
    352,695
    
    
    
    Interest rate swap assets
    
    
    864
    
    
    
    
    
    
    
    864
    
    
    
    Interest rate swap liabilities
    
    
    925
    
    
    
    
    
    
    
    925
    
    
    
    Fair Value Measurements at December 31, 2010 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)GSE obligations
    
    $
    81,034
    
    
    $
    
    
    
    $
    81,034
    
    
    $
    Trust preferred CDOs
    
    
    562
    
    
    
    
    
    
    
    562
    
    
    
    Collateralized mortgage obligations
    
    
    28,168
    
    
    
    
    
    
    
    28,168
    
    
    
    GSE mortgage-backed securities
    
    
    250,261
    
    
    
    
    
    
    
    250,261
    
    
    
    Total available for sale securities
    
    
    360,025
    
    
    
    
    
    
    
    360,025
    
    
    
    Interest rate swap assets
    
    
    790
    
    
    
    
    
    
    
    790
    
    
    
    Interest rate swap liabilities
    
    
    832
    
    
    
    
    
    
    
    832
    
    
    
    
   Available for sale securities 
  24




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##### Table of Contents



Interest rate swaps  Note 7  Derivatives.
   Fair Value Measurements at June 30, 2011 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Collateral-dependent loans and leases
    
    $
    1,965
    
    
    $
    
    
    
    $
    1,965
    
    
    $
    Other real estate owned
    
    
    570
    
    
    
    
    
    
    
    570
    
    
    
    Fair Value Measurements at December 31, 2010 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Collateral-dependent loans and leases
    
    $
    7,287
    
    
    $
    
    
    
    $
    7,287
    
    
    $
    Other real estate owned
    
    
    1,239
    
    
    
    
    
    
    
    1,239
    
    
    
    
 Impaired loans 
 Other real estate owned and non-real estate foreclosed assets 
  25




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##### Table of Contents



Loans and leases receivable
 Stock in the Federal Home Loan Bank of Boston
 Deposits
 Wholesale repurchase agreements
 Federal Home Loan Bank of Boston borrowings
 Subordinated deferrable interest debentures
 Financial instruments with off-balance sheet risk
  26




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##### Table of Contents



June 30, 2011
    
    
    December 31, 2010Book
    
    
    Estimated
    
    
    Book
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value(In thousands)Assets:Cash and due from banks
    
    $
    29,444
    
    
    $
    29,444
    
    
    $
    14,384
    
    
    $
    14,384Overnight investments
    
    
    1,296
    
    
    
    1,296
    
    
    
    395
    
    
    
    395Available for sale securities
    
    
    352,695
    
    
    
    352,695
    
    
    
    360,025
    
    
    
    360,025Stock in the FHLB
    
    
    16,274
    
    
    
    16,274
    
    
    
    16,274
    
    
    
    16,274Loans and leases receivable, net of
allowance for loan and lease losses:Commercial loans and leases
    
    
    772,216
    
    
    
    784,465
    
    
    
    765,446
    
    
    
    776,737Residential mortgage loans
    
    
    155,565
    
    
    
    159,943
    
    
    
    162,904
    
    
    
    166,744Consumer and other loans
    
    
    206,812
    
    
    
    200,302
    
    
    
    208,485
    
    
    
    203,545Interest rate swaps
    
    
    864
    
    
    
    864
    
    
    
    790
    
    
    
    790Accrued interest receivable
    
    
    4,380
    
    
    
    4,380
    
    
    
    4,842
    
    
    
    4,842Liabilities:Deposits:Demand deposit accounts
    
    $
    282,068
    
    
    $
    282,068
    
    
    $
    264,274
    
    
    $
    264,274NOW accounts
    
    
    66,093
    
    
    
    66,093
    
    
    
    70,327
    
    
    
    70,327Money market accounts
    
    
    123,843
    
    
    
    123,843
    
    
    
    96,285
    
    
    
    96,285Savings accounts
    
    
    330,054
    
    
    
    330,054
    
    
    
    341,667
    
    
    
    341,667Certificate of deposit accounts
    
    
    293,787
    
    
    
    294,487
    
    
    
    347,613
    
    
    
    349,386Overnight and short-term borrowings
    
    
    35,955
    
    
    
    35,955
    
    
    
    40,997
    
    
    
    40,997Wholesale repurchase agreements
    
    
    20,000
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    20,190FHLB borrowings
    
    
    293,277
    
    
    
    318,100
    
    
    
    260,889
    
    
    
    285,819Subordinated deferrable interest
debentures
    
    
    13,403
    
    
    
    16,550
    
    
    
    13,403
    
    
    
    15,645Interest rate swaps
    
    
    925
    
    
    
    925
    
    
    
    832
    
    
    
    832Accrued interest payable
    
    
    1,102
    
    
    
    1,102
    
    
    
    1,616
    
    
    
    1,616
 (9) Contingent Liabilities
    27




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##### Table of Contents



(10) Transfers and Servicing
    28




---



##### Table of Contents



(11) Merger Agreement with Brookline Bancorp, Inc.
         29




---



##### Table of Contents



ITEM 2.
    
    Managements Discussion and Analysis
 General
 Note 11  Merger Agreement with Brookline Bancorp, Inc. http://www.bankri.com SM
 Critical Accounting Policies
  Overview
  Rate/Volume Analysis Average Balances, Yields and Costs
  30




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##### Table of Contents



Interest Rate Risk
 Financial Condition  Asset Quality
      31




---



##### Table of Contents



Financial Condition  Executive Summary
  June 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2010(Dollars in thousands, except per share data)Total assets
    
    $
    1,618,756
    
    
    $
    1,606,508
    
    
    $
    1,603,759
    
    
    $
    1,573,323
    
    
    $
    1,613,520Loans and leases receivable
    
    
    1,152,677
    
    
    
    1,154,448
    
    
    
    1,155,489
    
    
    
    1,135,227
    
    
    
    1,136,524Available for sale securities
    
    
    352,695
    
    
    
    361,579
    
    
    
    360,025
    
    
    
    342,080
    
    
    
    345,566Goodwill, net
    
    
    12,262
    
    
    
    12,262
    
    
    
    12,262
    
    
    
    12,262
    
    
    
    12,262Core deposits (1)
    
    
    802,058
    
    
    
    775,830
    
    
    
    772,553
    
    
    
    755,105
    
    
    
    813,697Certificates of deposit
    
    
    293,787
    
    
    
    325,831
    
    
    
    347,613
    
    
    
    360,578
    
    
    
    360,323Borrowings
    
    
    362,635
    
    
    
    342,854
    
    
    
    335,289
    
    
    
    301,455
    
    
    
    294,137Common shareholders equity
    
    
    133,531
    
    
    
    130,192
    
    
    
    128,678
    
    
    
    130,769
    
    
    
    129,127Book value per common share
    
    
    28.51
    
    
    
    27.77
    
    
    
    27.53
    
    
    
    27.98
    
    
    
    27.63Tangible book value per common share
    
    
    25.89
    
    
    
    25.15
    
    
    
    24.91
    
    
    
    25.35
    
    
    
    25.00Tangible common equity ratio (2) (3)
    
    
    7.55
    %
    
    
    7.40
    %
    
    
    7.31
    %
    
    
    7.59
    %
    
    
    7.30
    %Core deposits to total deposits(1) (3)
    
    
    73.2
    %
    
    
    70.4
    %
    
    
    69.0
    %
    
    
    67.7
    %
    
    
    69.3
    %
 (1)
    
    Core deposits consist of demand deposit, NOW, money market and savings accounts.(2)
    
    Calculated by dividing common shareholders equity less goodwill by total assets less goodwill.(3)
    
    Non-GAAP performance measure.
    32




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##### Table of Contents



Financial Condition  Detailed Analysis
 Investments
 
        33




---



##### Table of Contents



Loans and Leases
 
 Commercial loans and leases 
       34




---



##### Table of Contents



Residential mortgage loans 
 Consumer loans 
  35




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##### Table of Contents



June 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Commercial loans and leases:Commercial real estate  nonowner occupied
    
    $
    210,888
    
    
    $
    200,809Commercial real estate  owner occupied
    
    
    176,059
    
    
    
    179,766Commercial and industrial
    
    
    159,512
    
    
    
    157,879Multifamily
    
    
    86,387
    
    
    
    79,934Small business
    
    
    60,141
    
    
    
    62,841Construction
    
    
    27,071
    
    
    
    30,349Leases and other
    
    
    70,777
    
    
    
    73,054Subtotal
    
    
    790,835
    
    
    
    784,632Unearned lease income
    
    
    (5,828
    )
    
    
    (6,159
    )Net deferred loan origination costs
    
    
    1,697
    
    
    
    1,791Total commercial loans and leases
    
    
    786,704
    
    
    
    780,264Residential mortgage loans:One- to four-family adjustable rate
    
    
    98,622
    
    
    
    106,341One- to four-family fixed rate
    
    
    58,268
    
    
    
    57,948Subtotal
    
    
    156,890
    
    
    
    164,289Premium on loans acquired
    
    
    547
    
    
    
    598Net deferred loan origination fees
    
    
    (22
    )
    
    
    (10
    )Total residential mortgage loans
    
    
    157,415
    
    
    
    164,877Consumer loans:Home equity  term loans
    
    
    122,962
    
    
    
    125,114Home equity  lines of credit
    
    
    83,449
    
    
    
    82,778Unsecured and other
    
    
    1,231
    
    
    
    1,511Subtotal
    
    
    207,642
    
    
    
    209,403Net deferred loan origination costs
    
    
    916
    
    
    
    945Total consumer loans
    
    
    208,558
    
    
    
    210,348Total loans and leases receivable
    
    $
    1,152,677
    
    
    $
    1,155,489
 Deposits
   June 30, 2011
    
    
    December 31, 2010Percent
    
    
    Weighted
    
    
    
    
    
    
    Percent
    
    
    Weightedof
    
    
    Average
    
    
    
    
    
    
    of
    
    
    AverageAmount
    
    
    Total
    
    
    Rate
    
    
    Amount
    
    
    Total
    
    
    Rate(In thousands)NOW accounts
    
    $
    66,093
    
    
    
    6.0
    %
    
    
    0.06
    %
    
    $
    70,327
    
    
    
    6.3
    %
    
    
    0.06
    %Money market accounts
    
    
    123,843
    
    
    
    11.3
    %
    
    
    0.69
    %
    
    
    96,285
    
    
    
    8.6
    %
    
    
    0.68
    %Savings accounts
    
    
    330,054
    
    
    
    30.2
    %
    
    
    0.31
    %
    
    
    341,667
    
    
    
    30.5
    %
    
    
    0.32
    %Certificate of deposit accounts
    
    
    293,787
    
    
    
    26.8
    %
    
    
    0.99
    %
    
    
    347,613
    
    
    
    31.0
    %
    
    
    1.34
    %Total interest bearing deposits
    
    
    813,777
    
    
    
    74.3
    %
    
    
    0.59
    %
    
    
    855,892
    
    
    
    76.4
    %
    
    
    0.75
    %Noninterest bearing accounts
    
    
    282,068
    
    
    
    25.7
    %
    
    
    0.00
    %
    
    
    264,274
    
    
    
    23.6
    %
    
    
    0.00
    %Total deposits
    
    $
    1,095,845
    
    
    
    100.0
    %
    
    
    0.44
    %
    
    $
    1,120,166
    
    
    
    100.0
    %
    
    
    0.58
    %
  36




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##### Table of Contents



Borrowings
 
  Asset Quality
  Nonperforming assets 
  June 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Loans and leases accounted for on a nonaccrual basis
    
    $
    17,322
    
    
    $
    15,069Loans and leases past due 90 days or more, but still accruing
    
    
    80
    
    
    
    Restructured loans and leases on a nonaccrual basis
    
    
    1,295
    
    
    
    1,444Total nonperforming loans and leases
    
    
    18,697
    
    
    
    16,513Other real estate owned
    
    
    750
    
    
    
    1,130Total nonperforming assets
    
    $
    19,447
    
    
    $
    17,643Delinquent loans and leases 60-89 days past due
    
    $
    1,847
    
    
    $
    2,429Restructured loans and leases not included in nonperforming assets
    
    
    2,126
    
    
    
    485Nonperforming loans and leases as a percent of total loans and leases
    
    
    1.62
    %
    
    
    1.43
    %Nonperforming assets as a percent of total assets
    
    
    1.20
    %
    
    
    1.10
    %Delinquent loans and leases 60-89 days past due as a percent of
total loans and leases
    
    
    0.16
    %
    
    
    0.21
    %
   37




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##### Table of Contents



June 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Nonperforming loans and leases:Commercial real estate
    
    $
    5,432
    
    
    $
    5,272Commercial and industrial
    
    
    2,362
    
    
    
    2,462Multifamily
    
    
    1,568
    
    
    
    717Small business
    
    
    817
    
    
    
    1,090Construction
    
    
    45
    
    
    
    470Leases
    
    
    1,713
    
    
    
    581Residential
    
    
    5,722
    
    
    
    5,045Consumer
    
    
    1,038
    
    
    
    876Total nonperforming loans and leases
    
    $
    18,697
    
    
    $
    16,513
  Higher-Risk Loans 
  June 30, 2011
    
    
    December 31, 2010Allowance
    
    
    
    
    
    
    Allowancefor Loan
    
    
    
    
    
    
    for LoanPrincipal
    
    
    and Lease
    
    
    Principal
    
    
    and LeaseBalance
    
    
    Losses
    
    
    Balance
    
    
    Losses(In thousands)Option ARM mortgages
    
    $
    889
    
    
    $
    11
    
    
    $
    1,124
    
    
    $
    11Interest-only residential first mortgages
    
    
    20,846
    
    
    
    948
    
    
    
    23,531
    
    
    
    235Junior lien home equity loans
    
    
    37,914
    
    
    
    335
    
    
    
    40,919
    
    
    
    363Junior lien home equity lines of credit
    
    
    59,429
    
    
    
    535
    
    
    
    60,262
    
    
    
    539Total higher-risk loans
    
    $
    119,078
    
    
    $
    1,829
    
    
    $
    125,836
    
    
    $
    1,148
  Watch List Assets
  38




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##### Table of Contents



Allowance for Loan and Lease Losses
   Six Months Ended June 30,2011
    
    
    2010(In thousands)Balance at beginning of period
    
    $
    18,654
    
    
    $
    16,536Loans and leases charged-off:Commercial loans and leases
    
    
    (1,851
    )
    
    
    (1,568
    )Residential mortgage loans
    
    
    (894
    )
    
    
    (837
    )Consumer and other loans
    
    
    (77
    )
    
    
    (116
    )Total loans and leases charged-off
    
    
    (2,822
    )
    
    
    (2,521
    )Recoveries of loans and leases previously charged-off:Commercial loans and leases
    
    
    243
    
    
    
    219Residential mortgage loans
    
    
    
    
    
    
    Consumer and other loans
    
    
    33
    
    
    
    12Total recoveries of loans and leases previously charged-off
    
    
    276
    
    
    
    231Net charge-offs
    
    
    (2,546
    )
    
    
    (2,290
    )Provision for loan and lease losses charged against incomeCommercial loans and leases
    
    
    1,265
    
    
    
    1,825Residential mortgage loans
    
    
    777
    
    
    
    1,052Consumer and other loans
    
    
    (67
    )
    
    
    273Total provision for loan and lease losses charged against income
    
    
    1,975
    
    
    
    3,150Balance at end of period
    
    $
    18,083
    
    
    $
    17,396
  39




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##### Table of Contents



June 30,
    
    
    December 31,2011
    
    
    2010(In thousands)Loan categoryCommercial loans and leases
    
    $
    12,938
    
    
    $
    13,370Residential mortgage loans
    
    
    1,652
    
    
    
    1,780Consumer and other loans
    
    
    1,559
    
    
    
    1,681Unallocated
    
    
    1,934
    
    
    
    1,823Total
    
    $
    18,083
    
    
    $
    18,654
    40




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##### Table of Contents



Results of Operations  Executive Overview
  For the three month periods endedJune 30,
    
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2010(Dollars in thousands, except per share data)Income statement data:Net interest income
    
    $
    13,999
    
    
    $
    13,515
    
    
    $
    13,215
    
    
    $
    13,478
    
    
    $
    13,626Noninterest income
    
    
    2,272
    
    
    
    2,332
    
    
    
    2,673
    
    
    
    2,289
    
    
    
    2,285Noninterest expense
    
    
    12,618
    
    
    
    11,269
    
    
    
    9,935
    
    
    
    10,350
    
    
    
    10,430Net income
    
    
    1,819
    
    
    
    2,307
    
    
    
    2,126
    
    
    
    2,808
    
    
    
    2,681Per share data:Diluted earnings per share
    
    $
    0.38
    
    
    $
    0.49
    
    
    $
    0.45
    
    
    $
    0.60
    
    
    $
    0.57Dividends per common share
    
    $
    0.19
    
    
    $
    0.19
    
    
    $
    0.19
    
    
    $
    0.17
    
    
    $
    0.17Operating ratios:Net interest margin (1) (5)
    
    
    3.69
    %
    
    
    3.58
    %
    
    
    3.49
    %
    
    
    3.61
    %
    
    
    3.67
    %Return on assets (2) (5)
    
    
    0.46
    %
    
    
    0.59
    %
    
    
    0.53
    %
    
    
    0.71
    %
    
    
    0.68
    %Return on equity (3) (5)
    
    
    5.54
    %
    
    
    7.25
    %
    
    
    6.46
    %
    
    
    8.57
    %
    
    
    8.54
    %Efficiency ratio (4) (5)
    
    
    77.55
    %
    
    
    71.11
    %
    
    
    62.53
    %
    
    
    65.64
    %
    
    
    65.55
    %
 (1)
    
    Calculated by dividing annualized net interest income by average interest-earning assets.(2)
    
    Calculated by dividing annualized net income by average total assets.(3)
    
    Calculated by dividing annualized net income applicable to common shares by average common shareholders equity.(4)
    
    Calculated by dividing noninterest expense by net interest income plus noninterest income.(5)
    
    Non-GAAP performance measure.
       41




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##### Table of Contents



Note 9 
Contingent Liabilities
   Results of Operations  Comparison of the Three Months Ended June 30, 2011 and 2010
 General
  Net Interest Income
 
  42




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##### Table of Contents



Average Balances, Yields and Costs
 For the three months ended June 30,2011
    
    
    2010Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Earned/
    
    
    Average
    
    
    Average
    
    
    Earned/
    
    
    Average(In thousands)
    
    Balance
    
    
    Paid
    
    
    Yield
    
    
    Balance
    
    
    Paid
    
    
    YieldAssetsEarning assets:Overnight investments
    
    $
    654
    
    
    $
    1
    
    
    
    0.14
    %
    
    $
    2,009
    
    
    $
    
    
    
    
    0.09
    %Available for sale securities
    
    
    350,396
    
    
    
    2,977
    
    
    
    3.40
    %
    
    
    346,907
    
    
    
    3,531
    
    
    
    4.08
    %Stock in the FHLB
    
    
    16,274
    
    
    
    13
    
    
    
    0.31
    %
    
    
    16,274
    
    
    
    
    
    
    
    0.00
    %Loans and leases receivable:Commercial loans and leases
    
    
    784,284
    
    
    
    10,552
    
    
    
    5.39
    %
    
    
    757,664
    
    
    
    10,943
    
    
    
    5.79
    %Residential mortgage loans
    
    
    160,332
    
    
    
    1,743
    
    
    
    4.35
    %
    
    
    167,289
    
    
    
    1,939
    
    
    
    4.64
    %Consumer and other loans
    
    
    209,659
    
    
    
    2,210
    
    
    
    4.23
    %
    
    
    204,235
    
    
    
    2,223
    
    
    
    4.36
    %Total earning assets
    
    
    1,521,599
    
    
    
    17,496
    
    
    
    4.61
    %
    
    
    1,494,378
    
    
    
    18,636
    
    
    
    5.00
    %Cash and due from banks
    
    
    15,974
    
    
    
    
    
    
    
    
    
    
    
    18,798Allowance for loan and lease losses
    
    
    (18,469
    )
    
    
    
    
    
    
    
    
    
    
    (17,034
    )Premises and equipment
    
    
    11,614
    
    
    
    
    
    
    
    
    
    
    
    12,244Goodwill, net
    
    
    12,262
    
    
    
    
    
    
    
    
    
    
    
    12,262Accrued interest receivable
    
    
    3,994
    
    
    
    
    
    
    
    
    
    
    
    4,252Bank-owned life insurance
    
    
    31,686
    
    
    
    
    
    
    
    
    
    
    
    30,435Prepaid expenses and other assets
    
    
    17,368
    
    
    
    
    
    
    
    
    
    
    
    16,898Total assets
    
    $
    1,596,028
    
    
    
    
    
    
    
    
    
    
    $
    1,572,233Liabilities and Shareholders EquityInterest-bearing liabilities:Deposits:NOW accounts
    
    $
    68,824
    
    
    $
    9
    
    
    
    0.05
    %
    
    $
    69,378
    
    
    $
    12
    
    
    
    0.07
    %Money market accounts
    
    
    120,216
    
    
    
    201
    
    
    
    0.67
    %
    
    
    81,271
    
    
    
    165
    
    
    
    0.81
    %Savings accounts
    
    
    338,168
    
    
    
    264
    
    
    
    0.31
    %
    
    
    373,225
    
    
    
    506
    
    
    
    0.54
    %Certificate of deposit accounts
    
    
    313,930
    
    
    
    774
    
    
    
    0.99
    %
    
    
    374,935
    
    
    
    1,481
    
    
    
    1.58
    %Overnight and short-term borrowings
    
    
    36,138
    
    
    
    9
    
    
    
    0.10
    %
    
    
    37,011
    
    
    
    19
    
    
    
    0.20
    %Wholesale repurchase agreements
    
    
    19,560
    
    
    
    142
    
    
    
    2.88
    %
    
    
    20,000
    
    
    
    143
    
    
    
    2.82
    %FHLB borrowings
    
    
    276,173
    
    
    
    1,931
    
    
    
    2.76
    %
    
    
    247,720
    
    
    
    2,518
    
    
    
    4.02
    %Subordinated deferrable interest debentures
    
    
    13,403
    
    
    
    167
    
    
    
    4.94
    %
    
    
    13,403
    
    
    
    166
    
    
    
    4.93
    %Total interest-bearing liabilities
    
    
    1,186,412
    
    
    
    3,497
    
    
    
    1.17
    %
    
    
    1,216,943
    
    
    
    5,010
    
    
    
    1.65
    %Noninterest-bearing deposits
    
    
    260,813
    
    
    
    
    
    
    
    
    
    
    
    219,136Other liabilities
    
    
    17,016
    
    
    
    
    
    
    
    
    
    
    
    10,168Total liabilities
    
    
    1,464,241
    
    
    
    
    
    
    
    
    
    
    
    1,446,247Shareholders equity:
    
    
    131,787
    
    
    
    
    
    
    
    
    
    
    
    125,986Total liabilities and shareholders equity
    
    $
    1,596,028
    
    
    
    
    
    
    
    
    
    
    $
    1,572,233Net interest income
    
    
    
    
    
    $
    13,999
    
    
    
    
    
    
    
    
    
    
    $
    13,626Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.44
    %
    
    
    
    
    
    
    
    
    
    
    3.35
    %Net interest rate margin
    
    
    
    
    
    
    
    
    
    
    3.69
    %
    
    
    
    
    
    
    
    
    
    
    3.67
    %
  43




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##### Table of Contents



Rate/Volume Analysis 
 Three Months Ended June 30,2011 vs. 2010Increase/(Decrease) Due to(In thousands)
    
    Rate
    
    
    Volume
    
    
    TotalInterest income:Overnight Investments
    
    $
    1
    
    
    $
    
    
    
    $
    1Available for sale securities
    
    
    (526
    )
    
    
    (28
    )
    
    
    (554
    )Stock in the FHLB
    
    
    13
    
    
    
    
    
    
    
    13Commercial loans and leases
    
    
    (769
    )
    
    
    378
    
    
    
    (391
    )Residential mortgage loans
    
    
    (143
    )
    
    
    (53
    )
    
    
    (196
    )Consumer and other loans
    
    
    (102
    )
    
    
    89
    
    
    
    (13
    )Total interest income
    
    
    (1,526
    )
    
    
    386
    
    
    
    (1,140
    )Interest expense:NOW accounts
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Money market accounts
    
    
    (32
    )
    
    
    68
    
    
    
    36Savings accounts
    
    
    (199
    )
    
    
    (43
    )
    
    
    (242
    )Certificate of deposit accounts
    
    
    (494
    )
    
    
    (213
    )
    
    
    (707
    )Overnight and short-term borrowings
    
    
    (9
    )
    
    
    (1
    )
    
    
    (10
    )Wholesales repurchase agreements
    
    
    2
    
    
    
    (3
    )
    
    
    (1
    )FHLB borrowings
    
    
    (849
    )
    
    
    262
    
    
    
    (587
    )Subordinated deferrable interest debentures
    
    
    1
    
    
    
    
    
    
    
    1Total interest expense
    
    
    (1,583
    )
    
    
    70
    
    
    
    (1,513
    )Net interest income
    
    $
    57
    
    
    $
    316
    
    
    $
    373
 Interest Income  Investments 
  Interest Income  Loans and Leases
   44




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##### Table of Contents



Interest Expense  Deposits and Borrowings 
     Provision for Loan and Lease Losses
 
 Allowance for Loan and Lease Losses.
 Noninterest Income
 
 Noninterest Expense
   45




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##### Table of Contents



Note 11 
Merger Agreement with Brookline Bancorp, Inc.
   Income Tax Expense
   Note 9  Contingent Liabilities
 Results of Operations  Comparison of the Six Months Ended June 30, 2011 and 2010
 General
  Net Interest Income
 
  46




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##### Table of Contents



Average Balances, Yields and Costs
 Six Months Ended June 30,2011
    
    
    2010Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    Earned/
    
    
    Average
    
    
    Average
    
    
    Earned/
    
    
    Average(In thousands)
    
    Balance
    
    
    Paid
    
    
    Yield
    
    
    Balance
    
    
    Paid
    
    
    YieldAssetsEarning assets:Overnight investments
    
    $
    731
    
    
    $
    1
    
    
    
    0.17
    %
    
    $
    2,150
    
    
    $
    5
    
    
    
    0.50
    %Available for sale securities
    
    
    352,886
    
    
    
    5,999
    
    
    
    3.40
    %
    
    
    359,640
    
    
    
    7,310
    
    
    
    4.10
    %Stock in the FHLB
    
    
    16,274
    
    
    
    25
    
    
    
    0.31
    %
    
    
    16,274
    
    
    
    
    
    
    
    0.00
    %Loans receivable:Commercial loans and leases
    
    
    781,001
    
    
    
    21,208
    
    
    
    5.47
    %
    
    
    744,825
    
    
    
    21,254
    
    
    
    5.74
    %Residential mortgage loans
    
    
    161,977
    
    
    
    3,442
    
    
    
    4.25
    %
    
    
    169,834
    
    
    
    3,968
    
    
    
    4.67
    %Consumer and other loans
    
    
    210,101
    
    
    
    4,405
    
    
    
    4.23
    %
    
    
    204,039
    
    
    
    4,451
    
    
    
    4.40
    %Total earning assets
    
    
    1,522,970
    
    
    
    35,080
    
    
    
    4.63
    %
    
    
    1,496,762
    
    
    
    36,988
    
    
    
    4.97
    %Cash and due from banks
    
    
    16,543
    
    
    
    
    
    
    
    
    
    
    
    16,139Allowance for loan and lease losses
    
    
    (18,498
    )
    
    
    
    
    
    
    
    
    
    
    (17,129
    )Premises and equipment
    
    
    11,705
    
    
    
    
    
    
    
    
    
    
    
    12,301Goodwill, net
    
    
    12,262
    
    
    
    
    
    
    
    
    
    
    
    12,221Accrued interest receivable
    
    
    4,131
    
    
    
    
    
    
    
    
    
    
    
    4,312Bank-owned life insurance
    
    
    31,538
    
    
    
    
    
    
    
    
    
    
    
    30,277Prepaid expenses and other assets
    
    
    16,509
    
    
    
    
    
    
    
    
    
    
    
    16,232Total assets
    
    $
    1,597,160
    
    
    
    
    
    
    
    
    
    
    $
    1,571,115Liabilities and Shareholders EquityInterest-bearing liabilities:Deposits:NOW accounts
    
    $
    68,440
    
    
    $
    55
    
    
    
    0.16
    %
    
    $
    69,025
    
    
    $
    27
    
    
    
    0.08
    %Money market accounts
    
    
    112,794
    
    
    
    373
    
    
    
    0.67
    %
    
    
    76,356
    
    
    
    314
    
    
    
    0.83
    %Savings accounts
    
    
    340,753
    
    
    
    534
    
    
    
    0.32
    %
    
    
    371,497
    
    
    
    1,037
    
    
    
    0.56
    %Certificate of deposit accounts
    
    
    324,524
    
    
    
    1,745
    
    
    
    1.08
    %
    
    
    380,237
    
    
    
    3,064
    
    
    
    1.62
    %Overnight and short-term borrowings
    
    
    37,916
    
    
    
    19
    
    
    
    0.10
    %
    
    
    38,080
    
    
    
    37
    
    
    
    0.20
    %Wholesale repurchase agreements
    
    
    19,801
    
    
    
    281
    
    
    
    2.82
    %
    
    
    19,116
    
    
    
    282
    
    
    
    2.93
    %FHLB borrowings
    
    
    274,722
    
    
    
    4,227
    
    
    
    3.06
    %
    
    
    259,665
    
    
    
    5,183
    
    
    
    3.97
    %Subordinated deferrable interest debentures
    
    
    13,403
    
    
    
    332
    
    
    
    4.94
    %
    
    
    13,403
    
    
    
    330
    
    
    
    4.95
    %Total interest-bearing liabilities
    
    
    1,192,353
    
    
    
    7,566
    
    
    
    1.27
    %
    
    
    1,227,379
    
    
    
    10,274
    
    
    
    1.69
    %Noninterest-bearing deposits
    
    
    258,092
    
    
    
    
    
    
    
    
    
    
    
    209,489Other liabilities
    
    
    16,258
    
    
    
    
    
    
    
    
    
    
    
    9,652Total liabilities
    
    
    1,466,703
    
    
    
    
    
    
    
    
    
    
    
    1,446,520Shareholders Equity:
    
    
    130,457
    
    
    
    
    
    
    
    
    
    
    
    124,595Total liabilities and shareholders equity
    
    $
    1,597,160
    
    
    
    
    
    
    
    
    
    
    $
    1,571,115Net interest income
    
    
    
    
    
    $
    27,514
    
    
    
    
    
    
    
    
    
    
    $
    26,714Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.28
    %Net interest rate margin
    
    
    
    
    
    
    
    
    
    
    3.64
    %
    
    
    
    
    
    
    
    
    
    
    3.59
    %
  47




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##### Table of Contents



Rate/Volume Analysis 
 Six Months Ended June 30,2011 vs. 2010Increase/(decrease) due to(In thousands)
    
    Rate
    
    
    Volume
    
    
    TotalInterest income:Overnight investments
    
    $
    (2
    )
    
    $
    (2
    )
    
    $
    (4
    )Available for sale securities
    
    
    (1,092
    )
    
    
    (219
    )
    
    
    (1,311
    )Stock in the FHLB
    
    
    25
    
    
    
    
    
    
    
    25Commercial loans and leases
    
    
    (1,045
    )
    
    
    999
    
    
    
    (46
    )Residential mortgage loans
    
    
    (397
    )
    
    
    (129
    )
    
    
    (526
    )Consumer and other loans
    
    
    (244
    )
    
    
    198
    
    
    
    (46
    )Total interest income
    
    
    (2,755
    )
    
    
    847
    
    
    
    (1,908
    )Interest expense:NOW accounts
    
    
    29
    
    
    
    (1
    )
    
    
    28Money market accounts
    
    
    (70
    )
    
    
    129
    
    
    
    59Savings accounts
    
    
    (424
    )
    
    
    (79
    )
    
    
    (503
    )Certificate of deposit accounts
    
    
    (917
    )
    
    
    (402
    )
    
    
    (1,319
    )Overnight and short-term borrowings
    
    
    (17
    )
    
    
    (1
    )
    
    
    (18
    )Wholesale repurchase agreements
    
    
    (11
    )
    
    
    10
    
    
    
    (1
    )FHLB borrowings
    
    
    (1,239
    )
    
    
    283
    
    
    
    (956
    )Subordinated deferrable interest debentures
    
    
    2
    
    
    
    
    
    
    
    2Total interest expense
    
    
    (2,647
    )
    
    
    (61
    )
    
    
    (2,708
    )Net interest income
    
    $
    (108
    )
    
    $
    908
    
    
    $
    800
 Interest Income  Investments 
 Interest Income  Loans and Leases
  Interest Expense  Deposits and Borrowings 
  48




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##### Table of Contents



Provision for Loan and Lease Losses
 
 Allowance for Loan and Lease Losses.
 Noninterest Income
 
 Noninterest Expense
 
 Note 11 
Merger Agreement with Brookline Bancorp, Inc. Note 9  Contingent Liabilities
   49




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##### Table of Contents



Income Tax Expense
   Note 9  Contingent Liabilities
 Liquidity and Capital Resources
 Liquidity
 
   Capital Resources
 
  50




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##### Table of Contents



Minimum Required
    
    
    Minimum RequiredFor Capital
    
    
    To Be ConsideredActual
    
    
    Adequacy Purposes
    
    
    Well-CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)At June 30, 2011:Bancorp Rhode Island, Inc.Tier I capital (to average assets)
    
    $
    130,896
    
    
    
    8.26
    %
    
    $
    63,386
    
    
    
    4.00
    %
    
    $
    79,229
    
    
    
    5.00
    %Tier I capital (to risk weighted assets)
    
    
    130,896
    
    
    
    11.63
    %
    
    
    45,031
    
    
    
    4.00
    %
    
    
    67,547
    
    
    
    6.00
    %Total capital (to risk weighted assets)
    
    
    145,016
    
    
    
    12.88
    %
    
    
    90,062
    
    
    
    8.00
    %
    
    
    112,578
    
    
    
    10.00
    %Bank Rhode IslandTier I capital (to average assets)
    
    $
    128,783
    
    
    
    8.13
    %
    
    $
    63,369
    
    
    
    4.00
    %
    
    $
    79,211
    
    
    
    5.00
    %Tier I capital (to risk weighted assets)
    
    
    128,783
    
    
    
    11.44
    %
    
    
    45,011
    
    
    
    4.00
    %
    
    
    67,516
    
    
    
    6.00
    %Total capital (to risk weighted assets)
    
    
    142,903
    
    
    
    12.70
    %
    
    
    90,021
    
    
    
    8.00
    %
    
    
    112,526
    
    
    
    10.00
    %At December 31, 2010:Bancorp Rhode Island, Inc.Tier I capital (to average assets)
    
    $
    127,711
    
    
    
    8.10
    %
    
    $
    63,035
    
    
    
    4.00
    %
    
    $
    78,794
    
    
    
    5.00
    %Tier I capital (to risk weighted assets)
    
    
    127,711
    
    
    
    11.27
    %
    
    
    45,316
    
    
    
    4.00
    %
    
    
    67,975
    
    
    
    6.00
    %Total capital (to risk weighted assets)
    
    
    141,925
    
    
    
    12.53
    %
    
    
    90,633
    
    
    
    8.00
    %
    
    
    113,291
    
    
    
    10.00
    %Bank Rhode IslandTier I capital (to average assets)
    
    $
    126,031
    
    
    
    8.00
    %
    
    $
    63,047
    
    
    
    4.00
    %
    
    $
    78,809
    
    
    
    5.00
    %Tier I capital (to risk weighted assets)
    
    
    126,031
    
    
    
    11.13
    %
    
    
    45,292
    
    
    
    4.00
    %
    
    
    67,938
    
    
    
    6.00
    %Total capital (to risk weighted assets)
    
    
    140,245
    
    
    
    12.39
    %
    
    
    90,584
    
    
    
    8.00
    %
    
    
    113,231
    
    
    
    10.00
    %
 Recent Accounting Pronouncements
 Note 4  Recently Issued Accounting Pronouncements
  51




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##### Table of Contents



ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
 
    Estimated Exposureto Net Interest IncomeDollar
    
    
    PercentChange
    
    
    Change(Dollars in thousands)Initial Twelve Month Period:Up 300 bps
    
    $
    (2,344
    )
    
    
    -4.30
    %
  Asset and Liability
Management
  52




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##### Table of Contents



ITEM 4.
    
    Controls and Procedures
    53




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##### Table of Contents



PART II. Other Information
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A. Risk Factors
  The Merger Agreement May Be Terminated in Accordance with Its Terms and the Merger May Not
Be Completed
   Termination of the Merger Agreement Could Negatively Impact the Company
  
    
    the Companys business may have been adversely impacted by the failure to pursue
other beneficial opportunities due to the focus of management on the merger,
without realizing any of the anticipated benefits of completing the merger; and
    
    the market price of the Companys common stock might decline to the extent that
the current market price reflects a market assumption that the merger will be
completed.
   54




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##### Table of Contents



The Company Will Be Subject to Business Uncertainties and Contractual Restrictions While
the Merger is Pending
  The Merger Agreement Limits the Companys Ability to Pursue Alternatives to the Merger.
  Following Completion of the Merger, Brookline Bancorp Will Face Risks Different from Those
Faced by Brookline Bancorp Today, which May Affect the Market Price of the Shares of
Brookline Bancorp Common Stock
   55




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##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number
    
    
    Maximumof Shares
    
    
    Number ofTotal Number
    
    
    
    
    
    
    Purchased as
    
    
    Shares Thatof Shares
    
    
    Average
    
    
    Part of
    
    
    May yet BePurchased
    
    
    Price Paid
    
    
    Announced
    
    
    PurchasedPeriod
    
    (a)(b)
    
    
    per Share
    
    
    Plan
    
    
    Under the Plan4/1/11 through 4/30/11
    
    
    968
    
    
    $
    44.10
    
    
    
    
    
    
    
    5/1/11 through 5/31/11
    
    
    10,068
    
    
    $
    43.53
    
    
    
    
    
    
    
    6/1/11 through 6/30/11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (a)
    
    In April 2011, the Companys Chief Executive Officer and Chief Financial
Officer and the Banks Chief Lending Officer had 968 shares of the Companys common
stock withheld to satisfy the tax withholding obligations arising in connection with
the vesting of 2,909 shares of restricted stock. The shares delivered were valued at
$44.00 and $44.32 per share for the April 20, 2011 and April 22, 2011 exercises,
respectively.(b)
    
    In May 2011, the Companys Chief Financial Officer and the Banks Chief
Lending Officer and Chief Information Officer had 10,068 shares of the Companys
common stock withheld to satisfy tax withholding obligations arising in connection
with the vesting of 30,100 shares of restricted stock on May 18, 2011. The shares
delivered were valued at $43.53 per share.
 
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 5.
    
    Other Information
   56




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##### Table of Contents



Item 6.
    
    Exhibits
 2.1
    
    Agreement and Plan of Merger by and between Brookline Bancorp, Inc. and Bancorp
Rhode Island, Inc., dated as of April 19, 2011 (Incorporated by reference to Exhibit 2.1 to
the Companys Current Report on Form 8-K dated April 22, 2011)10.1
    
    Release, Consulting and Non-Competition Agreement among Brookline
Bancorp, Bancorp Rhode Island, Bank RI and Ms. Sherman, dated as of April 19,
2011 (Incorporated by reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K dated April 22, 2011)10.2
    
    Change of Control Severance Agreement between Bank Rhode Island
and Tiffany Sy, dated as of April 19, 2011 (Incorporated by reference to Exhibit
10.2 to the Companys Current Report on Form 8-K dated April 22, 2011)10.3
    
    2011 Omnibus Equity Incentive Plan (Incorporated by reference to
Appendix B to the Companys Definitive Proxy Statement on Schedule 14A filed on
April 15, 2011)10.4
    
    Amended and Restated Non-Employee Director Stock Plan
(Incorporated by reference to Appendix A to the Companys Definitive Proxy
Statement on Schedule 14A filed on April 15, 2011)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
200232.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
  57




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
   Bancorp Rhode Island, Inc.August 4, 2011
(Date)
    
    /s/ Merrill W. Sherman

Merrill W. ShermanPresident and
Chief Executive OfficerAugust 4, 2011(Date)
    
    /s/ Linda H. Simmons

Linda H. SimmonsChief Financial Officer
and Treasurer
  58